Friday, June 19, 2009

Advantage #1 - It’s a System

First of all the fact that this is a system is an advantage. A good business system has requirements, rules, is clearly documented and repeatable. The same reasons that make McDonald’s or Subway a good franchise is that they can replicate the exact same quality of product and its business systems in every location. I believe my system can be repeated by others, but it has not yet been tested and verified repeatable. One of the objectives of this blog is to create a forum to allow others to test the system and determine if it is repeatable.

Unfortunately the terms “Stock Market” and “System” are oxy-morons, they just don’t go well together. At least in terms of pure mechanical trading systems, as far as I know there has never been a mechanical system that has continued to work. Oh by the way, don’t be fooled by those that claim their mechanical systems beat the stock market. They might for awhile but eventually the market has a way figuring them out and changing enough to make them null and void. So that is the irony of good stock market systems they are a combination of rules and procedures that eliminate emotion and yet are flexible enough and necessitate a certain amount of human analysis and judgment that is taught from mentor to an apprentice (i.e.: see Graham and Buffett).

System Requirements

The system shall…
1 …generate positive returns every year (no years with a loss)
2 …generate monthly income in order to utilize the power of compounding
3 …consistently produce 20 to 36% annual returns (reinvested doubles every 2 to 4 years)
4 …not take more than a few hours per month to execute (once learned)
5 …not require constant monitoring or supervision (can take a week Caribbean cruise, no internet)
6 …allow you to know how much you will make going into the trade
7 …put time decay value on your side
8 …have a 70% to 90%+ statistical success rate for each trade using mathematical probability models (minimizes risk)
9 …trade only the very best most fundamentally sound companies as the underlying asset
10 …minimize exposure to market risk by staying in cash the majority of the time
11 …be repeatable by anyone who understands how stock options work

Next up advantage #2:


  1. Hi Blaine, I like the idea of your blog...I would like to invest $5,000 in some stock (?) and find out how and when to PUT & CALL???

    What stock? I believe there are two for PUTS and the other for CALLS?

    ...and the BUY or SELL should be withing 3 weeks??? What do I know?

    I just want the 2% a month for WAM (Walking around Money??)


    Dick T.

  2. Now we're talkin'! That's a great idea... I'll put together this months WAM trade in my next post.